look, it should cool off tomorrow. in tell, not that great. t & t, negative after the bell on the margins. and i think the big cap bank stocks are due for a rest and pullback. that's a bunch of cohorts that could be said. that being said, stocks that go

to 90 will go to 120. a very bullish environment if we do sell off, i want you to buy, not sell. always a bull market somewhere, right here on "mad money." i'm jim cramer. i will see you tomorrow. good evening, i'm larry kudlow. this is "the kudlow report." yes, the stock market still bullish. i think that's great. i'm a bull too right now. but here's my challenge to everyone. instead of just a 2% economy, why can't we do so much better and get to a 4 or 5% growth economy? president obama has still not adopted progrowth policy. here's another thing. i'm not the only one who wants the president and congress to significantly cut spending. i mean, significantly. it would be progrowth and no more tax hikes by the way.

spending and the debt are the top issue of concern for voters. look, these heinous mass murders are not about weapons. question -- why isn't anyone tackling the really tough issue that may be the root causes of these atrocities? such as broken families, such as the absence of fathers who set examples for their sons? such as the loss of faith in our schools? such as our homes and our culture that have lost faith as well. tonight, we are going to talk about the family values breakdown in america. "the kudlow report" begins right now. another key point tonight. for most of the history, america drew at 3.5% per you. the last dozen years however, we have dropped below 2%. and the so-called obama recovery is just a tad above that 2% rate. which should be unacceptable. it is the worst in the post world war ii era.

so the question tonight, what's holding back the american economy? here's my quick road map for an economic boom. start off with major cuts in government spending. we should stop paying people not to work. then cut large and small business tax rates to about 25% or less. both large and small business. finally, president obama, please, ease up on all the regulations. i want to talk about this because nobody should be satisfied with 2% growth. let's talk to our friend dean baker from the center for economic and policy research. welcome to both of you. all right, dean, i think 2% is way too low. i think we should be striving for something that's more than twice and that history of america. why can't we get there? >> i agree that's way too low. your policies, they tried that unity, they're back in recession

or maybe they're scraping along. that's not going to do it. the story here, two issues. one, we are going to see slower growth because we have lower population growth and that's because people didn't have kids 30 years old. i don't know if you want to blame president obama for that, that's strange, but you can do so. this was a qualitatively different type of recession. he had a housing bubble, it collapsed. that was not the nature of the recession in '74, '75, '81, '82. those were easy to get out of. easy to have strong growth because the fed deliberately raised interest rates to ease the economy. lower interest rates, then you get a big boom in housing. you can't have that when you have the recession brought on by the housing bubble. >> okay. i've been become a spending hawk right now. i'll get to taxes in a minute, but look, all this government spending we are actually paying people not to work. and i think this is so bad for our economy as well as our moral

fiber. just some points, food stamps. in the last two years food stamp recipients are gone up 7.2%. and that's a period when the unemployment rate fell. then you can walk through social security disability insurance. you can walk through lengthy unemployment insurance. pell grants have kept -- keep people out of college rather than working. what we're doing is setting up a whole system where we're telling people don't go to work and if you can't work you can't grow the economy. >> we are copying the worst aspects of the european welfare state. paying people not to work. listen, you can say what you want about unemployment insurance, but all the extensions. i think the research is very clear. that the unemployment rate is higher than it would be otherwise. because of these continued extensions of lengthening of unemployment insurance. beyond that, does we have an optimal policy for growth in any area? listen, this economy is not -- you mentioned the past 12 years.

it's not been operating well since 2006. what have we done on the tax well, we have raised taxes on capital. we haven't cut the corporate income tax. we haven't done anything on immigration, we have added more regulation. if you want to add an expensive regulation, fine, get rid of one. we have not been thinking of the regulation or tax or spending on growth. listen, given how big the debt is, according to ken rogueoff we are past the red zone where the amount of debt we have is slowing growth. we need to deal with that too. >> we just put $1.3 trillion on. that came out today. small business, the backbone of the economy, they got a big tax hike. i think that's the most regrettable. instead of paying 40% plus 3.8% obama care, i don't think the small business should pay more than 25%. i don't think the large business should pay more than 25%. those are both anti-growth measures from president obama.

>> well, we should have free lunches too, larry. look, someone has to pay for government and the reality is you were talking about the past when we had more rapid growth. we did have more rapid growth, the '50s, '60s, top marginal tax rate was 90%. yet, we had good growth. that's not the story here. getting to -- you guys, you're so upset about unemployment insurance. people studied this, it does raise the unemployment rate, it does raise it. when you get unemployment insurance you have to be looking for a job. that means you're counted as unemployed. when their eligibility for unemployment insurance ends, they stop looking. if you think we'll have more growth because the people stopped looking for jobs that's little strange. >> one thing i'm very sure of, that we're not going to have more growth. if left of center folks keep trotting out the myths that we can go back to the tax rates of the 1950s and that's going to give us more growth, it will not

give us growth. it will kill the economy. we already have about the highest combined corporate tax rate investments on the planet. we need to lower that. we need to lower the taxes on capital. we need to bring in more high-skill immigrants. we're talking about raising taxes. it is a policy indulgence on your behalf to raise by 60% investment taxes in an economy that's bei that's barely growing. >> well, i'm all for high-skilled immigrants. let's get the doctors down to the european levels. we'd save $80 billion a year there. >> i want it there for the entrepreneurs, innovation. >> you're there. we're not helping entrepreneurs. but hurting. how about not drilling oil and gas shale in federal lands? there's a whole litany of this stuff. >> wall street crisis, that's why you have dodd-frank. >> this crisis, i don't have

time to go through what we have done on dodd-frank is doing more harm than good. we'll leave it there. me, i want 4% to 5% growth. smaller government, fewer regulations and stop paying people not to work! those are key points. thanks to dean baker. and jim. now, investors cheered some positive economic reports sending the s&p 500 to the best level in more than five years. the dow added 84 points. this is great. all good. but let me say this. regarding our potential to grow. given the high level of promise and the incredibly low level of interest rates, more interesting why isn't the stock market much higher than it is? why isn't the stock market setting new all time highs on a daily basis? i mean, way beyond october 2007. to help illuminate this, we bring bought stephen weiss,

author of "unhundredged, the kig of the market." why haven't stocks done better, with profits where they are. why? >> people are afraid. that's the reason. you have a dysfunctional washington right now which preys on the market. you have bond market that -- a bond market that holds up well. yields are back up a little bit, but people find safety in there what is a bubble. despite the lack of growth that you see stabilization in europe, in terms of not getting much worse a lot quicker. germany falling off a little bit. but that was expected. china, whether the numbers are real or not, as long as they keep lying about them if that's what they're doing, that's great. it shows improvement there. the u.s. is moving along slowly. >> 2% growth. >> terrible recovery. it's a terrible recovery for all the reasons that corporations hadn't spent because they didn't know what the tax bills would be. you see a big move from bonds

into equities. i think it will be a hockey stick year though. the second half of the year though. >> let's talk about something. good housing starts number here. >> yeah, multifamily. >> good drops in unemployment. and unexpected contraction, which is so typical. you get good and bad. housing starts very good. home builder stocks really on a tear. as an investor is it too late to play the home builders? i mean, housing is recovery. that's good. too late or not? >> i can spend the entire show talking about my mistakes but this was a doozie. because i haven't owned one housing stock longer than one millisecond. so i think it's too late. despite the improvements i wouldn't buy. i think the banks are a great way to play it. you have an opportunity in bank of america, and citi, not great like they used to be. >> both of them -- >> for good reason. >> why is that? >> citi, it was a kitchen sink

type of quarter. you have a new ceo coming in. if i'm him, it's not only this quarter, but next quarter as well where i'm going to throw the old guy's junk in there and set the bar very, very low. given that b of f was up, you had to expect the expectations were too high. >> a question, will they make the mortgages? >> yes. >> and will they make the business loans in the next year? in this new year, 2013? >> i think they will. >> can we count on the banks to extend credit? >> they can only sit so long with the way things are in terms of not making loans. then net interest margins as bonds back up, rates back up, you're going to see those improve. >> you think bond rates are going up? >> i do. >> why? >> because i think we'll come out of the easing cycle sooner than even the feds -- >> would that be bullish or bearish? >> stocks go up early in interest rate cycles moving

higher. but let me give you a caution. after the close tonight, we saw a couple of things. okay, we saw intel again, pardon ma my friend. they screwed the pooch again. now, here's what troubled me about it. they said their assumptions for the pension plan with too far off the mark. >> at&t? >> at&t. so they took a $12 billion charge. that served you well in 2011. not as well in 2012. it's definitely if i'm right not going to serve you well at all in 2013. >> one super quick. i noticed united health care did very well. the profit is good. would you buy it? would you buy health care insurers in general? >> i would. they'll do very well. buy the hospitals too. now they have no debt. because the government will pick them up, courtesy of mr. obama. >> you're not worried about price controls or partitioning, all the rest of it? >> not worried at all. >> fearless.

very optimistic. i american it. getting the economy moving is not just a federal government issue, but the states are in the battle too. we have one state governor who is trying to cut the tax burden for his people. in fact he's trying to eliminate it. later on in the show, we have blamed the weapons. we blamed mental health care. but what about the decline of the family and faith-based teachings about personal responsibility all over america? i think moral and religious deficit in this country plays a big role in these atrocities and in our cultural decline in general. we've got to face that fact. two prominent members of the clergy will face it. and the best path to prosperity is free markets, moral responsibility. i'm larry kudlow. we'll be right back. [ male announcer ] ok, here's the way the system works.

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get this. get this. four years ago there were 28 democratic governors. now, there are just 19. well, it shouldn't come as any big surprise because with the economy president obama and

democrats want to raise your taxes. republicans have a completely different idea and this week, nebraska's governor became the second republican in just the past week to propose ending his state's income and business tax. he gets it. tax reform. pro growth. joining us now to explain why is nebraska governor. your business rate is 7.8% is that true? >> that's true and iesd too high. >> all right. it's true and it's too high. certainly higher than your neighbors. let me ask you a question. i mean, i'm an advocate of flat tax rates as you probably know. your sales tax is 5.5%. which i think is the case. so my question to you is how do you make the numbers work? if you eliminate 7% and 8% tax rates on businesses and individuals, you've got a 5.5% sales tax. doesn't that sales tax have to

go up quite a bit? >> no, it doesn't. let me tell you what we're trying to do. we want to eliminate the individual income tax and the way to pay for it over the years we have granted way too many sal sales tax exemptions. we're going to get rid of the exemptions, don't favor one industry over another. by doing that we can take our corporate rate to zero. we can take the individual income tax rate to zero. again, we'll be more attractive for investment. >> so you're basically saying you could figure it out so the sales tax will not have to be raised, is that correct? >> that is exactly right because again, we granted way too many exemptions over the years. as you know, we need a tax code that's simpler and fairer and without all of the exemptions. >> all right. you'll be a lot more competitive with your neighboring states. a very enterprising -- i wish

you the best of luck. the keystone pipeline -- can i ask you, it looked like nebraska was one of the obstacles to the keystone pipe line. i want to know if that's been sufficient rerouting and so forth to make it okay to finally get this flood did thing going? >> larry, what i would tell you, i just received about ten days ago a 2,020 page report. i'm in the process of reviewing that. i'll make a decision here within the next couple of weeks. but significant progress was made on rerouting around the environmentally sensitive sand hills area in our state and we'll make a final decision very quickly. >> all right. so you're going to read this thing. 2,000 pages, well, good you'll read it. that will take you a couple weeks right there. at least it would take me a couple weeks anyway. >> i already had ten days so i'm making progress. >> if you put okay on it, will that clinch the deal? if you okay your rerouting in nebraska for the keystone pipeline, will that finally clinch the deal? we can start building this thing

as a big job creator and help get energy and fuel to those refineries? >> larry, i want to be very clear. president obama still has the final say. so once we make that recommendation, he could say yes. he could say no. and i really have no idea what he's going to do. >> all right. let me ask you about the health care, the obama care. first of all, are you -- is nebraska going to participate in the health care insurance exchange subsidy? are you going to be a player in that from your side? >> we are going to do the federal exchange, not the state exchange because it's too costly. secondly, i'm opposed to the medicaid expansion because we can't afford that. i am very, very concerned about this health care -- new health care law. it is already going to cost me millions in my current budget to implement it, effective 200014.

>> why is it costing you millions? what's the source oaf that expense? >> the source of the expense is the current growth in the medicaid program. once it begins this 2014 they'll try to have a number of people sign up for the current medicaid program. in my state, that'll be about $72 million. >> and are your businesses going to essentially take the penalty rather than the mandate and put their workers on to the so-called exchange? >> you know, i don't think we know the answer to that question yet. there's so much uncertainty and unknown. our businesses are still trying to figure it out. but i do know this. they're very, very concerned about the cost of obama care. >> all right. we'll leave it there. governor dave heinman of nebraska. good luck and thanks for coming on. now talk about a p.r. nightmare. boeing 787 dreamliners remain grounded around the world tonight. but did the stock bounce back? we have some answers ahead, i think. [ male announcer ] this is sheldon, whose long dy setting up the news

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office superstore ink retailer in america. now get $6 back in staples rewards for every ink cartridge you recycle when you spend $50 on hp ink. staples. that was easy. boeing cannot seem to wake up from its dreamliner nightmare. boeing cannot seem to wake up from its dreamliner nightmare. today aviation authorities around the world following the lead of our faa saying the 787 should be grounded right now until it can be determined if the plane is safe to fly after several battery-related incidents. this is another huge black eye for boeing and its dreamliner. however, the stock did finish up

more than 1% today in a rebound. and some air line experts say the problem is fixable. take a listen. >> i think that by this time next week, 787s will be back up and flying around the world. i think we're growing more convinced that the issue is specific to the manufacturing problem with a single batch of batteries. if that's the case, they can switch out the batteries, find a better regime for testing ones in the future. we can get this problem behind us in a matter of days. >> all right. well, i hope he and others are right. get that problem solved. now, here's my question for you this evening. when it comes to mass shootings and other violent crimes, why isn't anybody talking about the breakdown of the family? why isn't anybody talking about the lack of any prayer or moral teachings in the schools? why isn't anybody talking about personal responsibility? i didn't hear president obama say a word about these social failings.

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welcome back to "the kudlow report." in this half hour, welcome back to "the kudlow report." in this half hour, algeria says it's completed its raid on a group of the al qaeda-connected hostage takers. some of the hostages were americans. are they safe? well, we'll get an update. also, congressman paul ryan says the republicans are putting a temporary debt ceiling extension on the table. but if they don't take strong measures on the spending sequester and other budget cuts, they're going to be in danger of being out of office and losing the house in 2014. now, president obama, many of our leaders never seem to talk about the real root causes for crime, economic failure and

violence. i'm talking about the breakdown of families. talking about the absence of faith-based moral teachings in school. and the shrinking number of people even attending religious services. can we prevent future tragedies if we focus more on family values and faith? here now to help us with this, father george william rutler the church of our savior in new york. and the rabbi shmoley, author of "the broken american man and how to fix it." rabbi, let me begin with you. most of the mass murders and horrible events are committed by men or young boys. >> that is absolutely right. >> and i want to go there because that leads me to family breakup and that there are no fathers and there are no examples and there's no behavior. tell me what the effect of this family breakup is on these men. >> first of all, what parents do

for you is they make you feel like you're unconditionally of value. when a child is raised without a father say, then he doesn't get that same message. what you're seeing with so much of the gang violence, the african american youth are being mowed down, and it's a terrible tragedy that people aren't addressing. when it comes to mass murders like adam lanza they're often white. the only thing that gives them status and value is money, by which we purchase self-esteem. the net result is the message of religion is not being heard. we are seeing men feeling disenfranchised, angry, broken and rage-filled. they retaliate against a society that they feel demeans them and belittles them. >> that's the rage part. >> absolutely. >> father, let me go to you on this. if the family is broken as so many are, if there's no father, then how does the young man -- i'm going to use the young man in this case, it could be a young woman, but it seems to be coming from men, how does he

learn character or good deeds? how does he learn the difference between right and wrong and responsibility? >> well, if he doesn't have the father he's going to get it through devious channels. through the media. and we know what that feeds them. but we're talking about the breakdown of african-american families this is endemic, pandemic. you have got 53% out of wedlock births along latinos and almost 30% now amongst white families. so when we look at the situation in newtown, this was a suburb suburban -- this is not a ghetto environment. 1965 we had the moynihan report, and senator moynihan was pilloried for pointing this out then. >> which is exactly what's happening. unfortunately. he predicted this happening. >> he said -- then it was i think 23.7% unwed births amongst

african-americans. and he thought that was a disaster. in place of faith in the schools now, faith in god, we've got faith in the self which is narcissism. >> this is really an important point. i want to go here. when i grew up not far from here, the elementary school we said the lord's prayer every day. i want to ask you both, the absence of faith, the absence of religion which is the absence of morality, in the classroom, in the school, you're not allowed to do it anymore, how has this affected our culture? >> well, don't you think we're beening a bit of an extreme society. it's one thing to separate the church and state but there could be a moment of silence where children are allowed to reflect on something of higher meaning and significance. but larry, what kids are seeing today is the only thing that gives them status in this culture is beauty or power, money or fame. but soulfulness, character

doesn't do that. the net result is that our values are becoming more and more corrupt. as cowardly as it is not to have a guns debate in america, it's even more cowardly in the wake of sandy hook not to have a value debates. in president obama you have a man of unparalleled eloquence and he was a compelling personal story. why isn't he talking about this? >> he never mentioned it yesterday in the speech. >> an incredible thing. its not police who are supposed to be raising kids in gangs. by the way, adam lanza is a child of divorce. we never talk about the 50% divorce rate and the rage that leads to in children. i'm a child of divorce and i know what that feels like to be a yo-yo going back and forth on the weekends. >> look, besides family breakup, a lot of the kids do get to school. there's no faith in school

anymore. i don't know if they know what the ten commandments are. >> they don't. >> or the difference between right and wrong. they're ten commandments, not ten suggestions. one is thou shalt not kill. if you learn that, i'm not saying faith will prevent any of these disasters. but i am saying it might. at the margins, it just might improve the whole -- >> i think what really has been devastating is this kind of eugenics social engineering which thought that something could replace god, to define value. value's clarification was a fad a few years ago. but who clarified value? what were those values? this afternoon, i had a young man commit suicide. i mean, this is not a rare event. >> my regrets. >> from a situation, what we're describing now. so we talk about violence towards others.

the worst kind is violence towards self. >> self-hate red and loathing. there's a pattern among the white male mass murderers. lanza was a bit of an odd ball. people ignored him on the streets, that creates rage. i'm not explaining his monstrous behavior, but we have to look at it. klebold, he was bullied. that's not going to excuse acts of this evil. one of the messages of religion, everybody kind of matters and you have to give -- you have to say hello to them. and recognize them. >> whoever your higher authority is, he will look after you. he will look after you. you never have to be alone to face these problems. i'm stunned by how the culture has moved away from faith. i want to say to my pal, brian shactman, now we're seeing it in sports. two very famous sports stars caught up in very big scandals.

first we have lance armstrong. and now that's a notre dame linebacker, manti te'o. >> nice job. that was good. >> from notre dame. or is it noter shame? i'm not happy with this story. he is caught up in an incredible scandal. you have heard the clergy, brian shactman. let's start with the manti te'o from notre dame which is supposed to teach you good values. >> right. we don't know that he's done anything immoral. i mean, this story has not been completed. but basically it goes that his grandmother died in september. the story goes that his girlfriend died on the same day or within days depends on whose report you have. it turns out, not only did the girlfriend not die but she doesn't exist. there's one side where notre dame and manti te'o, a star linebacker, a runner-up in the heisman trophy, he said that he was duped into thinking that he had this connection with the woman. >> some people think -- that he

was the hoax creator. >> that he knew and didn't come clean or that he was involved in it for one reason or another. and so that's where it is. so either he's extremely gullible or he has some -- >> is this going to hurt his career? money, payouts for the draft? >> the nfl is the zero sum gain. if he's good enough, somebody will take him. but he was supposed to be a media darling. i have no doubt that he has the chance to lose millions of dollars and that's a connection with lance. >> i was going to stay, lance armstrong lied repeatedly for years. >> yes. >> this is a moral sin. it had to be. you can't lie your way through life. he did. you're running a special on that tonight. what's doing with lance armstrong? >> i want to bring in pete rose, somebody who didn't tell the truth for years and years. i talked to him today. this is what he said about lance and resonates with manti. tell you why. have a listen. >> i did it the hard way. don't do it like me. what i mean by that is come clean as quickly as you possibly can. because one thing i know if he

comes clean, it's going tyke a load off of his shoulders. once you do it, you say to yourself, why didn't i do that ten years or five years ago? but, you know t important thing as far as lance is concerned is he's doing it. >> it took 14 years or what have you. with manti, all the people are saying is that whatever the truth is, the sooner you come forward with what the truth is the better it is for him and for everyone involved. >> isn't that a moral point that brian -- the sooner you come forward, all right, your higher power will forgive you. at least that's what i believe. he'll forgive you. he'll forgive your sins. that's what we learned in your church. that's what we learn in your temple. >> if you believe it's a sin. >> but you have -- you have -- right. you have to understand that. >> if you don't believe it's a sin, you profess you're a victim of your everyone crime and you become a hero by acknowledging what you have done. but not by doing anything about it. >> what is the sin here? let's face it.

it's the very narrow definition of success. success at all costs. lance armstrong wanted to be a winner. what if we actually catered to his ambition and redefined success. you're not a success when you don't have a character. we need a broader definition of success that brings this into the game. >> this also speaks to what we elevate as heroes. we look up to the people. manti te'o was a hero to many. lance armstrong was a hero to hundreds of thousands if not millions of cancersurvivors. we had hoped that sports was a place to go and we could aspire to the people. >> manti should come clean. >> whatever the truth is. that's the bottom line. >> catholic churschool, i thinks a good catholic boy. go ahead and do it. come clean. >> this is different too. lance changed his body to win. >> going to a catholic church

school. i don't want to distinguish -- >> don't you think think that's something strange he has been talking about somebody -- because didn't exist, but seemed real over a computer. we're living in a kind of virtual reality now. >> but even with that reality not to interrupt you -- how do i reference you? >> father. >> forgive me, i'm jewish. i don't know. how can somebody go years and not meet that person that they profess love to. so there's so many flaws in this story line, even accepting technology it doesn't make sense. people want to know what the story is. >> honesty is virtue. i hope we don't lose that virtue. but i hope our institutions are permitted to teach that virtue that's the part that bothers me. by the way, always thanks to brian shactman for helping. be sure to watch cnbc sports biz tonight.

11:30 on the nbc 130sports netw. instant reaction to lance armstrong's confession. also, many thanks to father rutler and the rabbi. thank you. now, we're going to turn a different direction. the american hostages in north africa, the raid on the natural gas plant has been completed. what does that mean? are our people safe? we'll have a report on that coming right up. she knows you like no one else.

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[ male announcer ] send the aflac duck a get-well card at getwellduck.com. some some hostages and some kidnappers are dead a after the algerian military began an operation to rescue a group of captors including at least three americans. it is being held at this natural gas facility over there. michelle caruso-cabrera has the details. this is a tricky one. what can you tell us? >> well, the reports are conflicting and confusing. there are casualties but we don't know how many. at least one british soldier died during the event. here's the chronology as we know it. early yesterday, islamic militants take them at gun point who all work at a natural gas plant which is co-owned by british petroleum and early this

morning the algerian government begins a military operation to take back control of the facility. ten hours later reports that the intervention is over and some, maybe many, are dead. secretary of state hillary clinton addressed reporters earlier in the day saying the u.s. has long been committed to fighting terrorism in the region. >> we know we face a continuing, ongoing problem and we're going to do everything we can to work together to confront and disrupt al qaeda in the islamic maghreb. we'll be working with our friends and partners in north africa. >> and now we have learned, larry, that u.s. officials have told nbc news as many as seven americans were involved in this situation. there could be more. >> michelle, let me just ask you, first of all, are there any american troops or forces, have they gone there, do we have a

presence in this? >> american troop, no. there are numerous reports that u.s. drones are over algeria. the white house would not confirm that at all today. hillary clinton did not confirm that either. we do know that we are providing intelligence support to french troops in the neighboring country of mali which turns out to be the touch stone that set off these militants in algeria. they wanted to retaliate for that action. >> all right. a tough one. michelle caruso-cabrera, thank you very much. it's now final. listen to this. according to the congressional budget office the u.s. debt in 2012 jumped from -- jumped to $16.1 trillion from $14.8 trillion. that in 2011. that's $1.3 trillion deficit. you know, if the republicans want to save their house majority, they'd better cut spending like there's no tomorrow. we'll have a little debate on our budget priorities next up. almost tastes like one of jack's cereals.

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welcome back. welcome back. house budget committee chairman paul ryan announced today that republicans are putting a short-term debt ceiling hike on the table. short-term debt ceiling hike. but here's what i'm not hearing and what we should be hearing is an unambiguous plan to splash

spending now. republicans need an absolute rock solid plan to implement the sequester which is $1.2 trillion over the next ten years. this is essential. not just to unite the republican conference. but more importantly, it's essential to helping the economy grow more rapidly. and if the republicans don't get it done, i'll say this. they may lose the house in 2014. so let's talk with karen finney. who's a columnist for the hill and former dnc communications director. and hadley heath, senior policy analyst at the independent women's forum. hadley, this paul ryan, he went out and met with reporters. republicans are in the retreat down in williamsburg, virginia. maybe they'll use a short term increase in the debt ceiling maybe three months or six months. is that the point? how does that inform you? does that get to the heart of the matter? >> it certainly doesn't get to

the heart of the matter. if we remember back in 2006 then senate obama said raising the debt limit is a sign of leadership failure. since he has been in office we have raised it six times. i believe we'll do it again. but it's spending cuts, we have to have responsible reductions in spending as soon as possible. >> you know, karen, welcome back. according to the cbo today the debt level went from -- i'm going to use round numbers, a little under $15 trillion to a little over $16 trillion. that's 2012 over 2011. this will make the fourth straight trillion dollar budget deficit and the largest increase in debt. it's not being talked about right now. but it is all on president obama's watch at some point he's going to be culpable. >> well, here's the problem, larry. you know, the suggestion put forward by paul ryan really plays right into something you mentioned, but also the broader problem that republicans have right now and that is that at this point, public opinion is on the side of the president. they don't see republicans

coming to the table with serious proposals. i think there's a bigger problem with coming forward with short term ideas. i think both a political problem, because that continues to erode confidence that these guys can actually come together and get a deal done. and number two, i think it's ultimately bad for our economy. so i think on both of those fronts that doesn't show a level of seriousness i think that is going to help the republicans get out of a place to come to the table and actually have this conversation with the president. that's part of why the president is faring very well in the conversations. >> you know, hadley, i think it's interesting. it's about messaging, isn't it? about communication by the republicans. they must must must give a tough spending cut. i mean, to me, the spending sequester which would take $100 billion off this year, $100 billion, a pretty good number. whatever happens in the future. they have got to make that clear. they had not made that clear. second, hadley, they have got to make it clear that president obama's democratic tax hike that

was in the fiscal cliff discussion is -- that's the last tax hike. in other words, they have to make boat of those -- both of those points clear. i'm all ears but i don't hear it. >> karen made a good point, short term bad-aid budgeting is bad for everybody. it creates a lot of uncertainty. but we have seen the senate the last time the democratically controlled senate passed a budget was in 2009. in order to responsibly prioritize our budget we need to see a budget come out of the senate and from the white house. president obama is going to miss his february 4th deadline to submit his budget. >> i know that's an argument that the republicans like to make, but it's unfair because technically if there was no budget the government would be shut down. we know there's the budget control act and the continuing resolutions. the government has been funded to lower levels than actually the cbo had anticipated if we would have had a budget. so technically the president is actually already signed

$2.4 billion -- sorry, trillion in spending in -- towards the debt reduction. two-thirds of which have been in cuts. again, if we'll come to the table and have a real conversation about both deficit reduction and spending cuts, the republicans have got at least to put a real proposal on the table other than okay, we're going to do a temporary or do a month to month to try to hold some of this hostage rather than putting forward serious ideas. >> well -- >> well, i think they have put forward some serious ideas. the ryan budget and the several iterations of it. >> which would require an increase in the debt ceiling by the way. >> i believe an increase in the debt ceiling is on the way. before we seriously address the root of the problem. >> i don't have a problem with raising the debt ceiling. i don't want to cause a problem, but it's got to be spending cuts. >> yeah. >> whether you agree or not. i'm sure you don't agree, but the republicans right now must have this message of spending

cuts for the life of them they cannot get out of that. and no more tax increases. i mean, put yourself in their shoes. >> yeah. >> you're a former communications director. don't you think they have got to have that kind of message? >> yes. they have -- but they have to come forward also, larry, with a message that says and here's how we want to do it. and in a way that says, you know, again, because remember part of the reason they're losing this argument is they're very vulnerable to the argument they're trying to protect, you know, the big corporations and, you know, sort of corporate welfare at the expense of the middle class. if they're going to come forward and say here's our plan, it's got to be have a message and here's why it's got for everyone. that's somebody to help everybody. marley when we're having this conversation. you and i have talked about this. we're talking about the increase needs for mental health care. talking about potential security in schools. guess what? that costs money. >> that's okay. >> but you have -- >> fence off some money for that.

>> but in a balanced way i haven't heard that. >> they have to do that. hadley, i don't think that's hard to do. >> i don't either. >> we need a sense of urgency about it. yesterday, the president spoke eloquently about protecting the children. our children are bearing the weight of this burden. the debt in future generations. >> i have to get out of here. that's it for this evening's show. as always, thanks for watching. i'm larry kudlow.

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